Euro breaches $1.50 barrier

With America seen as the weakest link in the global economy, the dollar is still diving. Will it last and what does it mean for sterling?

THE EURO, once the butt of currency dealers' jokes, is now enjoying its place in the sun. Last week the currency traded above $1.50 against the beleaguered dollar for the first time in its nine-year history.

The dollar's fall also helped to produce a grim new milestone for energy users. Its weakness contributed to a rise in oil prices to almost $103 a barrel. Though calculations vary, on most measures that is the highest oil price in inflation-adjusted terms in the modern era, exceeding the level reached in 1980 in the aftermath of the fall of the shah of Iran in 1979.

As with other dollar-priced commodities, the American currency's fall has a twin impact on oil. It leads to a compensatory rise in prices and encourages investors to seek what they see as the safer haven of commodities. Both effects conspire to push prices higher.